Using Tar and Gzip to compress files is usually gives smaller files, but these will not work correctly on typical Mac OS files and applications as those utilities know nothing of resource and data forks.
Resource and data forks aren't usually important on OS X... but if you have any OS 9 or even some carbon apps, they might need those... so I would say use Panther's zip feature first, then .sitx (which has better compression than just .sit)